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Impact of a GM Bankruptcy

Impact of a GM Bankruptcy. GMSSPP or GMPSP 401(K) Promark Income Fund Pension Plan Pension Benefit Guarantee Corporation Can I rollover all or part of my pension plan and 401(K) to an IRA? What can I do with after tax assets in my 401(K)

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Impact of a GM Bankruptcy

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  1. Impact of a GM Bankruptcy • GMSSPP or GMPSP 401(K) • Promark Income Fund • Pension Plan • Pension Benefit Guarantee Corporation • Can I rollover all or part of my pension plan and 401(K) to an IRA? • What can I do with after tax assets in my 401(K) • How can I access assets from my 401(K) or IRA penalty free before age 59 ½ • Defensive actions to consider

  2. GMSSPP or GMPSP 401(k) • Amounts invested in a 401(k) plan by a participant constitute assets of the 401(k) retirement plan and are held in trust for the benefit of the participant. • These investment assets do NOT belong to the plan sponsor and are segregated and separate from the plan sponsor’s assets. • Under current law, participants’ assets are NOT at risk of being determined to be property of a General Motors bankruptcy estate.

  3. Promark Income Fund • What is Promark Income Fund? • A bank maintained collective investment fund managed by General Motors Trust Bank with a stable value investment strategy. • GMTB is an indirect wholly owned subsidiary of General Motors and a GM Bankruptcy should not affect GMTB’s ability to serve as manager of the fund. • The fund invests in investment grade and non-investment grade fixed income securities (9/08) • 35.6% Corporate, 25.8% Mortgage Backed, 20.5% Government, 11.5% High Yield, 5.7% Short term • Insured by wrap contracts issued by several highly rated insurance companies. (AA by S&P) • Aegon, ING, Pacific Life • For more information refer to GM PSP and GM SSPP Prospectus

  4. Pension Plan • Will bankruptcy affect my pension? • Much more complex than 401(k) issue • It is possible that GM Bankruptcy will have no current affect of on the pension plan. • Pension plan could continue to operate through bankruptcy proceedings and could continue to be an obligation of a post-bankruptcy GM. • In some cases, bankrupt companies do choose to terminate their pension plans as part of their reorganization.

  5. Pension Plan Funding • Funding of Pension Plan according to GM filing with the SEC on 2/18/09 • Combined U.S. pension assets dropped to $84.2 billion on 12/31/08 compared to $104.1 billion at end of 2007. Funding levels dropped from 124% to 87%. • Market correction (GM pension 26% equities) • Early Retirement Buy outs • Hourly pension now $55.5 billion and 83% funded • Salaried pension now $28.7 billion and 95% funded • May have to seek additional financial support in 2013 and 2014 if funding conditions don’t improve

  6. Pension Plan • Termination of Pension Plans • Terminated plans don’t necessarily mean terminated benefits for participants. • Many current retirees and near retirees may see no changes in their benefits IF GM did terminate their pension plan. • Termination of the plan means turning over its operation to the Pension Benefit Guaranty Corporation (PBGC)

  7. Pension Benefit Guaranty Corp. • Created by Employee Retirement Income Security Act (ERISA) of 1974. • Protects the retirement income of 44.1 million American workers in 30,330 private sector defined benefit pension plans. • PBGS is NOT funded by general tax revenues. • PBGC collects insurance premiums from employers, earns money from investments, and receives funds from pension plans it takes over.

  8. Pension Benefit Guaranty Corp. • If your plan ends without sufficient money to pay all benefits, PBGC will pay you the benefit provided by your plan up to the limits provided by law. • Now pays monthly retirement benefits to about 683,000 retirees in 3,595 pension plans that ended. • The maximum pension benefit guaranteed by PBGC is set by law and adjusted yearly. • For plans ended in 2009, workers who retire at age 65 can receive up to $4,500 per month ($54,000 yr.) Single life annuity or $4,050 per month ($48,600 yr.) Joint and 50% Survivor Annuity. The guarantee is lower for those who retire early. The guarantee increase for those who retire after age 65. • For additional information- www.pbgc.gov

  9. Maximum Monthly Guarantees for 2009 AGE Single Life Joint/50% Survivor 65 $4,500 $4,050 64 $4,185 $3,767 63 $3,870 $3,483 62 $3,555 $3,200 61 $3,240 $2,916 60 $2,925 $2,633 59 $2,745 $2,471 58 $2,565 $2,309 57 $2,385 $2,147 56 $2,205 $1,985 55 $2,025 $1,823 54 $1,935 $1,741 53 $1,845 $1,661 52 $1,755 $1,580 51 $1,665 $1,499 50 $1,575 $1,418 Pension Benefit Guaranty Corp.

  10. Pension Benefit Guaranty Corp. • In a recent interview, the acting director of the PBGC Vince Snowbarger noted that GM is not expected to terminate its pension plan in bankruptcy. • Uncertainties of bankruptcy makes the issue of pension plan termination a very volatile and fluid situation.

  11. Can I rollover all or part of my pension plan and 401(K) to an IRA? • Pension Plan • Active Salaried Employees • Your Part B contributions only • Will reduce monthly benefit • Employees who have severed service • Order pension projection for: • Single life annuity and 65% survivor benefit • Lump sum option • Pension Protection Act and IRS regulations impose restrictions on accelerated payments (Lump Sum Distributions) when funding levels fall below 80%. • As of 12/31/08 GM Hourly pension funding level was 83% and Salaried pension plan was 95% funded. • Delphi pension no longer allows lump sum distributions

  12. What can I do with after tax assets in my 401(K) • Available penalty and income tax free for emergency cash reserves. • Rollover to tax free Roth IRA in 2010.

  13. How can I access assets from my 401(K) or IRA penalty free before age 59 1/2 • 401(k) Age 55 Rule • IRA 72 (t) Rule

  14. Defensive actions to consider • Build up emergency cash reserves in FDIC insured money mkt, savings, or CD’s. • Pay down short term debt. • Review your current mortgage rate and if appropriate, refinance to new lower rate 30 yr. fixed mortgage. • Rebalance 401(K) and other investments to more moderate allocation. • Update your retirement plan • Review current holdings to assess age 55 rule, 72(t), and after tax assets. • Pension alternatives

  15. Actions to Consider • Update your financial plan to adjust for: • Lower pension benefits • Higher health care cost • Higher taxes • Longer life expectancy • Increase retirement savings • 401(k) & new Roth 401(k) • IRA’s and Roth IRA’s • Tax Deferred Variable Annuities with living and death benefits • Separately Managed Accounts • REIT’s • Delay retirement or work part time for a few years

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